time. the polled forecasters say the economy probably added about 155,000 jobs last month. 155 is the dow jones commitment. 150 is the reuters estimate. both those numbers are up from that paltry 115,000 that we saw back in april. the unemployment rate is also seen holding steady at 8.1%. and look out, it's a friday. it's not going to be an easy one. european shares are in the red. this comes after a slew of weak numbers. data showed that the eurozone's manufacturing sector contracted at its steepest pace in nearly three years in may. meantime italy's april jobless rate reached a record high of 10.2%. we'll have a live report from london. not helping, the economic numbers out of china. surveys of the country's factory sector showing momentum slowed last month. economists say this signals a deeper than forecast deterioration. and it is taking its toll on the u.s. equity futures.

you'll see right now the dow futures down triple digits. s&p indicated to open 15 below where it closed yesterday and nasdaq futures are off by 25. >> and that is likely to change i imagine at 8:30 when we get the big number. walmart holding it annual shareholder meeting this fayetteville, arkansas. >> this is walle mart's first opportunity to speak to shareholders asince the allegations of bribery broke and an opportunity to vote shares in response. amid the executive presentations and musical performances,

shareholder business will take place. results of six proposals will be announced including the annual election for the board. which has been met with some contention. all 15 members are up for re-election. and google's mayer is on the ballot. urging shareholders to vote against a number of current board members. pension funds have cast their votes against the incumbent board members they believe were somehow connected to the alleged bribery. most notably the founding family member. each pension if you said hods spell i don't knows of shares because the walton family holds the near majority, it's unlikely current board members will lose their seats. but what remains to be seen is if shareholder pressure is must have to sway management to make changes on its own. walmart international ceo said to media yesterday that they're

using the fcpa investigation as an opportunity to enhance their compliance in all areas around the world. also stressing that integrity remains one of the core values of the company. so while walmart investors and employees and even shoppers aren't thrilled about the allegations, they are focusing on the financial fundamentals. and i'll tell you why the stock is hitting new highs despite the scandal that rocked the world's largest retailer, that's coming up at 7:00. >> courtney, thank you very much. meantime we're keeping a very close eye on the markets ahead of the jobs report. there's been a lot of chaos. futures down 106 points. may ended with a pretty severe losing streak. we did tell you that i know the worst may we've seen since 2010. but here's a better statistic for you. for the first time in 43 years, the dow up only 45 times in may.

it's been a difficult time. >> 6% is not a good number. good it is not. done 6% at the end of the time. it snapped a accept monseven mo for the dow. at 8:30 the jobs report. that will give us a little insight. and it could move the markets one direction or another. but about if you watched what was happening overnight in some of the other markets, as well p oil markets continuing at this point down another $1.50. again the good news is that it will mean cheaper gas. bad news is the reason we're seeing these declines are huge concerns about what's happening to the global economy. it's also playing out in the bond market. check out the ten year because it's been weaker again this morning. the yield has at this point -- ten year has been stronger, yield's been weaker. lowest level. >> full disclosure, i'm trying to refi. i talked to the broker

yesterday. it's unbelievable. >> what rate are they offering for a 30 year fixed? >> 30 year fixed -- >> a double secret. you have a triple super duper jumbo. >> 4%. and he thinks today maybe it could go lower. >> i want to talk to greenspan about this because he's told us on this program that most important data point he watches is the yield on the ten year. so what is this telling him, 1.537%. >> normally after a bad may, it does go up in june. a fraction. >> although for the last accept yeerars seven years, june has bn down. >> usually one of the world's biggest economies isn't splitting up. >> there's an ft story from robert zoellick, he said something that scared me.

why want to misquote him, but he said they're not running at this point tfrom the banks, but they are jogging. and once that starts, that is a really scary thing to watch. >> you're planning a refi. this next board -- i'm going to europe. >> 1.2318. the and you are row right now, lowest level in i can't even tell you how long. it was already a two year low at 1.24. dollar-yen at 78.12. and gold prices again if there's an enigma, it's gold. why gold hasn't been benefiting more. it's down $10.50. >> should go down with a strong dollar. >> and the dollar vostrong is because of fear factor. >> calamity would be -- it's not off the table.

>> you would think the fed has to step back in with qucin qe-3. >> seems to be a fear trade more than an inflation trade. it's mahard to really worry abo inflation in this environment. >> our guest host yesterday, in his notes he pointed out we don't know what inflation would be, where prices would be if -- maybe there sptd inflation, maybe we would have seen a 25% drop in prices across the board. >> i think we're coming up on deflation. >> maybe down the road. >> we have to talk to dr. greenspan about that. >> time for the global markets report. kelly evans, go to europe, where the news is. almost like an international correspondent. that was smart, kelly will, get close to the continent. >> i'm ahead of the tape, what can i say. i wish it weren't so grim over here because i don't have a lot of good news for you this

morning. what i can tell you is that we've seen just astonishing numbers out of the bond market. first a look at equities. as you can see, very few advancers out of the and you are row stoxx 600 on the day. we're down about 1.3% and we've really just continued to sell off throughout the morning. weak manufacturing activity. you can see what this has done to a lot of regional equities.ibex 35 only down 0.1%. cac 40 down 1.5%. xetra dax 2.2%. seeing weakness in deutsche bond, too. ftse 100 down about 0.8%. britain was among the places including germany that has seen manufacturing activity according to the pmi survey down at a three year low. and as we know from denmark where if you just want to take one example, we saw the pmi go

from 63 to i think like 52 from april to may. exports are a real problem. it's also hit china overnight. both hsbc and the official index weakened. of course when you can't find a lot of places around the world that are growing, no wonder we're seeing some of the acts here behind me. i've given you the bigboard because it really warrants it this morning if you want to know what's happening in the tone we're handing off to you. we'll start with some of the flight to safety bids. so the ten year german bund 1.6% and that's actually off the lowest levels that we reach today. the ten year gilt in the uk, three year lows for manufacturing data. 300 year lows for yields here. 1.513%. ten year in the u.s., 1.54% at this point. who is weaker? of course we're talking about spain at a level of 6.6%. italy back over 6%. two year shats negative this

morning. a quick final look at currencies. euro-dollar continuing to sink. becky, i heard you you you asking about those levels. we're still at about a two year low here. we'll have to keep going down towards that 1 about.20 mark before we start making lows that are mores historic than that. but those days may not be it too far. >> kelly evans delivering really great news this morning. appreciate that very much. she only deliver it is when it's good news. we are also of course counting down to the may jobs report. joining us, senior u.s. economist at ubs and charles campbell at mkm partners. before we get to the job, i want you to sort of set the table for us on jobs, but in light of what we're walking in to with the mar cuts today and what's going on in europe, how important is the jobs full relative to everything else going on?

>> for the fed i don't think it's really all that important. i don't think the fed cares relative to the potential disruption from europe. but i think the oddity of it is that europe will probably keep the fed from doing qe because what's the point of doing qe with ten year yields where they are. >> charles, what's your number on the morning? >> my sense is that it's important in the sense that markets and investors care about how bad have conditions key tearer rated here in the united states. that is to say markets will be relieved if it's not a worse than expected number. whisper is probably in the 125, 135 range. so if you get a number which beats the whisper, markets will be relieved. so i think that's the key here. >> sometimes friday is like opposite day because whatever

the number is, there's this other view of do we want qe-3. what number would very with to see for ben bernanke to say maybe i actually have to do something? >> it's one data point and the fed looks at a series of data points over a period of time and builds a fact pattern. so if the number were sub 100 for may and june proved to be sub 100, then i think they would begin to see a trend that would clearly be in contrast to what they saw in december, january, february where we were reporting 2, 2 1/4. but at this point the data is not there yet to have that pattern established. >> drew, let's talk about participation rate and what the overall unemployment rate will be, what the will headline risk is. and my good friend joe, what was it, two days ago that we had

this debate about whether maybe it could be manipulated. >> i'm just asking the question. >> somebody had a note out today on another reason that it might be. >> there's assumptions about the participation rate and you're free to make all these different assumptions. it's not an exact science. i'm just wondering if you can make it look better than -- my question is i will be -- i'll be surprised if we have an uptick between now and the election in the unemployment rate. >> you shouldn't expect a pick up in -- >> i thought we needed 180,000 or 200,000 to even keep it where it is. why has it dropped a full point from 9.2 to 8.2 when we've had anemic growth the entire time? >> first of all the relation

between grooet growth and unemployment is perfectly normal and i can send you the chart to prove it. the more important thing is that the participation rate is reflecting the fact baby boomers are retiring because they're turning 65. >> i've heard that, but we've gone there 66 that -- drew, if we get down to 49%, at that point where you you say maybe will isn't normal? >> i just hope i'm part of the other 51 at that point. i think the break even for jobs is closer to 100 than the 200 that gets bandied about. and i think that's part of the reason you're seeing it it drive lower. the other reason, i think at the end of day, job growth has been understated. they just keep revising and in the longer term you'll see more job growth than is reported. >> some states are also getting to the the point where they are pushing people off the unemployment rolls. they're no longer doing the emergency long --

>> how long have you been there now, charles? >> about three weeks. >> how is it there, do they finally appreciate you? >> it's great. it's better than i imagined in every dimension. >> so i guess where will we be during the election? it would be nice to be at 7.8% or below because that's where it was when the president started. >> absolutely. the president needs every economic indicator going his way. the u-3 level, that metric is probably the most commonly understood economic concept which gets reported in tomorrow's papers across the country. whether you're employed, partially employed are underemployed -- >> i didn't know that could you actually lose jobs as drew just said and have the unemployment rate still go down. that's pretty good sleight of hand. >> well, we'll see.

the president need it is to go down very quickly. and we'll see what happens. participation rate, the fed studies say 40% to 60% is due to demographics. some due to level of confidence p but a lot of the confidence indicators from michigan and conference board are generally holding up okay. >> okay. we have to leave it there. thank you for setting the table this morning. >> and they can't get automatic over their skeeis. >> set the table. fair enough. >> when in rome or this our case washington, we'll into us a washingtonians do and talk politics with john harwood who is so comfortable in this town. and we have a yat shgreat show newsmakers in store. at 7:00, it's greenspan. the maestro. >> call him doctor. >> and then at 8:00, house minority whip steny hoyer.

also house majority leader eric cantor. are they on set? also kneel caskash kacash khar. stay toor tuned. you walk into a conventional mattress store, it's really not about you. they say, "well, if you wanted a firm bed you can lie on one of those. we provide the exact individualization that your body needs. wow, that feels really good! once you experience it, there's no going back. during the final days of the sleep number memorial day sale, save 50% on our innovative sleep number silver edition bed. sale ends sunday. only at the sleep number store, where queen mattresses start at just $699. and then treats day after day... well, shoot, that's like checking on your burgers after they're burnt!

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it is jobs friday and the global markets are already under quite a bit of pressure. u.s. equity futures down by triple digits. they've gotten worse just in the

last few minutes. down almost 120 for the dow. s&p down by 1.3%. nasdaq off by 1.16%. this is a day when that implied open actually works on the percentage basis to show you just how bad things are. european stocks have been leading us will. they're under pressure there, too. italy down by 1%, greece down by another 2 pp.7%. dax off by almost 2.7 about%%, . google is accusing microsoft and nokia of mobile collusion. the search giant filing a formal complaint with the european commission. it argues the two companies are conspiring to use their patents against smart phone industry rivals. >> what do they say about people in glass houses? >> shouldn't low stones abou s stones glp this makes no sense to me. this is an amazing battle going on.

but let's talk washington. >> he's here. >> i know, mr. washington. >> we're thin d.c. for jobs friday. great chance to catch up with our favorite chief washington -- only one. john harwood is here. and so many great things always converge in business and politics. >> are you thinking it's jobs friday or conspiracy friday? are they massaging the numbers? >> hilda solis would never -- the activist and former congresswoman would never -- >> oh, please. >> don't you realize there would be nothing in it for anyone to do that? >> do you think -- participation rate, you can gain that however you want with the assumptions. >> the point is what would you get out of that. because the number is low? no. >> you better hope we get to 7.8

before the election. if you don't get to 7.8 before the election, it was up above 7.8 the entire time you were president. >> what people vote on is the conditions in their own lives. right? so it they know whether they're making money. whether they can pay their bills. >> so we don't need to report the jobs numbers any more because nobody pays attention to them? >> no, it is an indication of what people will be feeling in their real lives, but if they put out a number today said and it's 3%, do you think the whole country would like not get it? >> there's a negative and positive feedback. >> hold on. when the jobs numbers were going up, all of a sudden when things were going great just a couple months ago, everything's mood was better. and then all of a sudden -- >> that's because it's a reflection of actual conditions. but if you monkeyed around with the numbers on try to make numbers look better than people actual lives were respect you wouldn't get any votes from it. >> they're told how they feel and nobody knows how they feel.

think about china. how accurate are those numbers in china? so how accurate are ours? >> people are told how they feel? >> you told me people didn't understand health care that's why they didn't like it. obamacare. you got tons of mail about that because they weren't smart enough to understand what's good for help. if we were above 9%, there would be a big problem for the re-election cam apaign. being ready to break under 8% is much better. >> it's not about the number. >> here we go. we have europe on our plate this morning already. we'll view the unemployment number with europe as a backdrop which i think gives the administration an opportunity to say if there is weakness in the economy, if we are in another sum amer swoon, you'll be able blame it on europe and i think

you'll increasingly hear that. i don't know it if you saw john day already's piece -- >> the blame won't do much for you anyway. if people feel lousy, if they think their lives are getting worse mf- >> but you can say -- >> they're not going to say it's europe's fault so i'll vote for obama. >> if you say my policies were effective but europe threw a bump in the road for me, it's a par cry from my policies didn't work, didn't though how to manage the economy. that's an external problem. >> that's why we have campaigns. it's an argument. >> is there a way to blame bush for the europe problem which is hurting the economy? have you figured out a way to do that yet? when's the last time -- >> you're reaching, man. >> maybe he's never been there. then you're really going to have a problem. >> he didn't travel all that much before he became president. maybe if he traveled more before he became president conditions

would have been better. >> the truth comes out how you you really feel. all right. so let's get this straight then. the people -- >> by the way, did you sthee gracious portrait unveiling yesterday with george w. and laura and the parents -- >> funny how everybody gets along. the strangest fbedfellows get along. >> he said i know you're glad to have this like fls of nfness ofg in the white house because now you can say what would george do. laura said how they were talking about how the white house was their home for eight years and she said i know that you're really happy these portraits of both of us are here because nothing makes a house a home like portraits of the previous owners. >> and can we talk about bill clinton pulling a cory booker

last night? >> sure. >> he never pulls a cory booker. >> that was as close as could you. >> bill clinton did exactly -- >> he said that governor romney has a, quote, sterling business career. shouldn't be going after bain. that pushed it completely in a different way. what's it doing to the campaign is this. >> nothing. >> is there any mood change around private equity in terms of what's going on in the white house? >> no. i was talking to some democratic strategists this week about the blow back that has occurred over those attacks and there's a lot in new york, new jersey, connecticut, democrats who are close to wall street, close private equity. and the argument they make is nobody cares about that. they need to pound this in the target states heavily and make it stake. >> john, great to have you. when we come being aboutkcome b. trs would define you as an innovator.

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welcome back to "squawk box" here on cnbc. i'm joe kernen along with becky quick and andrew ross sorkin. our top story, the global markets followed by the jobs report. but first things first. futures are indicating down triple digits after a lousy may. not great for the first day of june. a really rough session two days ago and starting out like that

this morning. the problems again are being imported. i like imported cars and you love those italian suits and shoes, andrew, but we don't like importing this weakness in the stock market. let's take a look at the european markets. greece eventually will run out of points. >> only down 2.8%, but coming off of these losses chewing away the -- >> spain has been in the news today. >> even germany, 2.6%. all red. and we'll import it that here. and then oil has been down consistently and that's about fully a reflection not only of the dollar -- 85 we attitudely

thi studly think that's a bargain. >> saudis need it up around 85 to 90 just to make their promises. >> but if the price goes down and you sell less, then you can buy even fewer rolexes. >> so just tough talk and say you'll cut and not do it. >> the it tten year note -- >> this is unbelievable. this is worse than 2008 on the ten year. i'm looking at a chart, looks like it's worse than the depression. what does that say about the world? >> i think will is a level the lowest santelli was telling us as just before we got into world war ii. maybe 1.46% or something. somebody was telling us the other day just as we were getting into -- >> if we're half the rate of 2008 and we thought the world

was on fire then, and we're sort of walking around still -- >> they were contrasting -- i don't know if that was the ten year. shall yeah coming if here. i don't like that. anyway, let's -- did you see that? i don't usually notice it. >> that was the look we're giving you. >> because we aren't really this close. you wow, look at those wrinkles. >> no, no wrinkles. >> 1.23 now. check that out. what about 1.10, is that possib possible? >> yeah, its eye possible. >> somebody was writing yesterday that the solution has to be weeks away, not months and years because the spanish banks are making it a much more urgent issue. >> you have people starting to move money. then you have a problem.

>> gold down ten bucks. nobody talks about $2,000 gold anymore. >> david einhorn is making a huge bet on gold. likes apple. we'll give him a call after the show, talk about some of the stuff. >> thousands of walmart workers attending the retailers annual meeting hoping to convince walmart investors to vote out several board members in connection with the mexican bribery investigation. jackie gable is a walmart associate from wisconsin. she's at the meeting today, also a member of the organization united for respect at walmart. and jackie, welcome to the program. thank you for joining us today. >> thank you for having me. >> i know this is an organization that you joined in 2011. how many employees belong to this group? >> my earpiece fell off. >> i think we're having a few

technical issues. we'll try and get jackie's earpiece set up. you but again, will this am meeting is today. and it's a difficult time for the annual meeting to be coming together. walmart shares have been holding up trading above $65. we've spoken with several investors who are major investors including warren bu h buffett who says he's okay with everything that's happened and still is confident. >> so many of the big sfugs al i institutional investors say nonevent. >> it for me it's not about whether bribery is good or morally right. it's is it morally ambiguous for shareholder. they measure is purely in -- >> jackie, why don't you tell us about will this group united for respect. you joined in 2011. how many members are there in

this group? >> well, there are thousands of members. we have new members joining every day. so i can't really give you an exact number. but a engineering a go, probably had about 200 members. and at this point, we are well into the thousands.year ago, pr about 200 members. and at this point, we are well into the thousands. >> walmart is the largest employment in the united states short of the federal government. what are the concerns you have with what's happening at the company? >> well, one of our concerns is there's become a real double standard at the company. as associates, we're held to a very high standard and unfortunately with the mexican bribery scandal, it really has brought that to light. another one of our major concerns is that the performance of the stock.

it's been consistently underperforming for probably the last ten years. when i first started working for walmart 24 years ago, it was an excellent investment. and it's just not -- it consistently underperformed. and those of us who are long term investors, are depending on that to be able to retire. >> the stock price has not reflected what's the underlying fundamentals of thetrading at $ have tripled sense then. it was just the multiple was high back when the blue chip stocks were commanding 30 and 40 mull tip multiples. underlying results just haven't rhee been reflected in the stock price. >> well, no, i just think the

top executives have made some poor decisions. and it has caused the stock to underperform. >> jackie, real quick. what do you make of the fact that so many of the big institutional investors, and i'm not talking about employees and i completely appreciate the point you're making, don't seem to think that the bribe rry scandal is it a big deal. how do you reconcile your view with that view? >> my view is what i was trained by walmart and sam walton to believe. and that is that we are held to a very, very high standard of ethics and integrity. and honesty. our jobs depend on that. i've seen associates called in the office for making an honest mistake and the minute they call you in the office, they tell you

you your integrity is in question. and to me that's hypocritical. if the big investors feel that that type of dishonesty is already, then they are not holding to the principles of sam walton holds us to or held us to. >> i think there are still questions obviously the piece was in the "new york times" and we have not heard a lot of details and that's something investors have told us they would like to hear more about. but we appreciate your time today and we thank you for joining us. >> okay. thank you. if you have any comments, questions about anything you see here on squawk, shoot us an e-mail. squawk@cnbc.com is the address. you can also tweet us at squawk cn cnbc. cnbc.

monday our guest host will be turnaround specialist harry wilson. he'll sound off on markets, jobs and the global economy in his first interview since joining the board of yahoo!. and a special interview with though bell prize winning economist joseph stiglitz. don't miss "squawk box" monday starting at 6:00 a.m. eastern.

welcome back. u.s. equity futures are indicated down more than 100 points. morgan stanley's james gorman --

>> the industry will be down graded. the question is to what degree. what we have done and the kind of company we are now from a few years ago, it's very different. we've sold assets. we've done all of this long before moodys came along. >> and we are counting down to the jobs report. joe kinahan is standing by. finally action in the cme. hey j.j., joe. you can call me ray. big move in the vix the other day. what is the up side potential now for the vix? sky's the limit. i'm not saying we like volatility, but it does cause people to tune in. we could be on the cusp of something, no? >> you you guys like volatility, it help wills your ratings. traders like because it usually means more trading. the vix we've seen really heavy action in the 30 and 32 calls. which would equate to us

obviously going lower. most of the folks down here believe that the futures are right around 1295, that they have to go down to 1287 to pill in a gap that we saw on the sunday night session two weeks ago which was the low for the month. obviously it's been a rough month. we only had six up days the entire month. so that makes things a little rough, also. >> funny the way the fundamentals company a less because who knows what the numbers will be for the jobs report and then you have all the stuff happening in europe. it makes sense that the market is moving in to this period right at this time. even though it's supposed to be discounting things. >> what i find interesting is if you think back to the earnings season that ended a few weeks ago, one of the things we have to credit so many of the ceos for in the calls is so many of

them said the u.s. itself isn't look that bad. domestically we're fairly bullish. one ceo called it the dead zone. and if asia slows down, can we saw last night, this could be a really rough quarter. so just three weeks ago, the ceos were giving us this forewarning and i think we're starting to see a little bit of it play out. i don't think many of them thought it would be this fast as you talked about before the break. the ten year at 1.5 basically right now and nobody's even left the eurozone left. if somebody does reach tleave t eurozone, that's why people are buying vix because thing wills get kra city if it does happen. >> all right, joe, thank you. >> all right a pleasure. thank you. >> happy friday. coming up, it's one of the most ambitious american projects in a generation and it's largely made -- sadly not here, it's in

china. scott cohn with a cnbc investigation that reveals miscommunications, and missed opportunity to create thousands of american jobs. and then at 7:00, the man of the hour, we'll be counting down the may jobs report with former fed care m chairman alan greenspan. optionsxpress, where you can trade your favorite products, all in one account. keep watch on the markets. or use our exclusive tools to help find ideas. it's powerful, easy-to-use technology for trading stocks, options, and futures. keep trading whether you're at home, in the office, or on the go. optionsxpress, the broker smart traders deserve. open an account today at optionsxpress.com. and then treats day after day... well, shoot, that's like checking on your burgers after they're burnt! [ male announcer ] treat your frequent heartburn by blocking the acid with prilosec otc.

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welcome back to squawk this morning. the theme of the day, jobs. the decision to build the main portion of the san francisco bay bridge in china, scott cohn with an investigation. . >> there it is, the eastern span of the san francisco to bay bridge. finally taking shape. it opens a year from labor day. it is a beautiful sight but tainted to some by the fact that the tower and roadways, the main section of the bridge really were made in china. it was a decision to save money. but all day long we're looking at what was saved and what was lost. >> it's dramatic by design. this is how it will look when it's done and it's almost there.

>> there's no bridge in the world like this. there probably will never, ever be another one like this. >> which is why the decision to outsource the main portion of the bridge hurts. >> what is it about american regulations, american taxation, american labor cost and attitudes that makes it cheaper to go to china than to go to the united states? >> the program manager for the bridge says the state had no choice. >> the largest companies in this country just simply didn't have the capacity to be able do that work in the time that we required. >> reporter: but it turns out china hasn't delivered the bridge on time and it may not have saved any money either. with nearly $300 million in overruns, the suspension span is now budgeted at $1.75 billion, almost identical to a bid the state rejected to build the bridge with american steel. while there's no way of knowing what kinds of overruns the

americans would have had, long-time industry analyst michelle applebaum says this is a missed opportunity. >> the u.s. has majored in shooting itself in the foot since the 1930s. i think we've been waging our own tread war against ourselves since the depression. >> reporter: she says u.s. firms have a better track record than china when it comes to bringing projects in on time and at least close to budget and there was a plan to do that, a plan that got preliminary approval from the california department of transportation. it was nixed. we'll be looking at that later today. and also, there's supposed to be a law that keeps projects like this in america. how did they get around it? coming up on "power lunch" we'll tell you how and why they did that. >> thanks for that. interesting stuff on an important jobs day. it makes a lot of sense to talk about this issue and a lot of others. >> scott, this is a huge, huge issue that's got to be

resonating with people there, too. the unions at this point must be up in arms when you take a look at the cost overruns. >> well, absolutely. and, you know, this has been going on forever. remember that the existing bay bridge was damaged back in 1989 in the earthquake and it's been going on ever since then. so we're already beyond two decades. when they decided that they needed to replace the bridge, they decided at the height of the dot-com bubble, they wanted to make it iconic and that made the cost goes up and then they decided they had to go to china and the question is what did they save and that is not as clear cut as a lot of people thought. >> scott, what part of the construction did they think they were going to save on? was it a purely a labor issue that the chinese labor wasn't going to be as expensive as the union-based labor in this country? >> it was the labor, it was the steel and -- >> the steel, too? >> and as we're going to show

you later on today, there was this plan to build a plant to add the manufacturing capacity here in the u.s. they didn't do that because the project ultimately went to china, but in china they built a new plant, too. the thing was, though, that in china they got that plant up and running in less than a year and there's still a lot of questions about whether they could have done that in this country. >> scott, do you really believe we wouldn't have the same kind of overruns here? that's going to be the hypothetical that we'll never know. >> absolutely, you'll never know. but the track record, which we're told is that -- and statistically the u.s. companies don't have those kinds of overruns. you think about it, originally bid at $1.4 billion. it's almost a 30% cost overrun. some of that is just what happens with time and costs go up as the project goes on and on. we'll never know whether we

could have done better in this country and also what we lost in terms of jobs and manufacturing capacity by letting it go to china. >> don't forget the big dig, too. we know about overruns. >> the renovation of my apartment. >> that's almost the same size of this bridge. >> thank you. >> scott, thank you very much. again, that's scott cohn. >> when we come back, former fed chairman alan greenspan will talk jobs, europe and the central bank's moves. an hour with the master as we count down to the jobs report. report.

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welcome back to "squawk box" on cnbc. i'm becky quick along with joe kernen and andrew ross sorkin and we are in washington live this morning. the employment report is looking for non-farm job growth of about 155,000. reuters is looking for 150,000. the unemployment rate is expected to remain unchanged at 8.1%. and although the bulk of the market's attention will be on the jobs report, there are other items are significance.

at 8:30 we'll get april personal income numbers and major automakers will issue may sales figures throughout the day. new numbers out of china are pressuring world markets this morning. 50.4 for may in the pmi. we've been watching the futures here. there have been a lot of pressure that's been coming down this morning. dow futures are down by 108, s&p are off by 15. that's a drop of 1% for the s&p, 1.2 almost and 1% for the nasdaq and dow joan off by .88%. it's coming because of concerns out of europe, too. we have the ten-year note at this point yield, 1.529%. that's an incredibly low number. these are historic levels that

we've been watching throughout the day. these yields have been dropping just about every single day. we're going to get the chance in a moment to ask dr. alan greenspan what he thinks about these thing. >> and the 50th annual walmart shareholder meeting is today, coming amid the alleged bribery and coverup scandal. our courtney reagan is in arkansas getting ready for the main event. courtney? >> bus loads of associates and shareholders have begun to arrive here. it was just section weeks ago that allegations of bribery in mexico surfaced and while the investigation is ongoing it already seems the downward pressure on walmart shares have passed. while they did lose more than $10 million in the week of the scandal, they have recovered all its losses and gained 5% since

that time, leading the four positive dow components for the month, currently trading at fresh 52-week highs. so far only one analyst has down graded the stock. the market seems to believe the company's position it will not have a meaningful impact on business. however analysts noted they could change positions if executives vacate positions since the current room has jelled. it's unlikely that angry shareholders will be able to unseat incumbent board members today but it's not completely impossible that pressure and negative sentiment won't call voluntary resignations. walmart's key u.s. same-store sales continue an upward trend after eight quarters of negative growth and a 10% profit year

over year. it seems the headlines haven't shared away shoppers. consumers we have spoken to express interest in shopping elsewhere but lower prices make it hard to justify. executives are likely to offer not much more than what's already been said, stressing that integrity is a core value. will that be enough for share holders? we'll ask them, 14,000 of them, and bring it to you at 8:00. >> we are in d.c. counting down to the jobs report. we have a special guest, alan greenspan. good to see you, chairman. love seeing you. it has been a while. >> it has been. >> we've talked for a minute and i'm already sort of excited about what you started telling me and then you said stop and

wait till the cameras are rolling. but for whatever reason in this country right now we feel like our economy isn't growing the way it used to be able to and that our jobless rate isn't coming down to where it used to be and we're really wondering why it is. and we know that europe is a problem and we know that the hangover from the financial crisis is a problem but does that explain everything that's happening right now? >> hardly. i think the best way of viewing what's going on is to think of the fact that we really have two separate economies. one economy is behaving reasonably well in the sense that its unemployment rate is not down to 5% but it's getting close and its growth is reasonable and in line with the general trend over the long term. there is a small second part of the economy, which is largely those assets, which as i've said

on this platform before, which have a life expectancy of more than 20 years. and those are largely structures and buildings and they are operating at half of operations. in other words, they're down almost 50%. and the reason is there's an extreme level of forward discounting going on. can you see it between the 30-year treasury on one hand and the five-year note on the other hand. that spread is the largest i've seen in history. as you go out on the maturity schedule, the discounting goes up and up and up so market values of long-term assets have been severely depressed and that is where the problem is. because so long as the

uncertainty which is creating that suppression remains, and i see no immediate indication that it's going to go away, it means that we're living there with an 8% of the economy, which is down almost 50%. that when you convert it to the unemployment rate is about 3 percent and points or more of the unemployment rate. so much that's where the problem is. >> what's the uncertainty you're talking about? we always hear that people aren't looking at our budget deficit yet and you look at the bond market and the vigilanties aren't active yet. so that the people who argue against austerity say that's not our immediate problem, the budget deficit. you think that is an overhang right now for part of the uncertainty? >> i listen to what people say, that we don't have to worry, we can do it in our own time. good luck. i mean, the markets doesnn't

know -- have not been told -- i lived through 1979 when i recall vividly when the ten-year treasury note was selling at like 9% yield and the general argument on the street this was is as far as it can go basically because the united states is not an inflation-prone economy. everyone believed that and it went up 400 basis points in the next three months. >> that's what scares me is we don't know when a bond market event can happen but it can be violent and with how much we owe right now, every man, woman and child, if we were paying that back at 5% or 6%, it's almost look spain. it's almost unsustainable for

us. >> i hope it's not like spain. markets are not tolerant. >> they have been, though. >> they have been until they're not. there's a general assumption, almost every economist i speak to say we'll deal with the longer term problem later, let's get to work now on short-term stimulus. that presupposes something they do not know, namely will the markets tolerate that? i know of no way you can make that judgment. i'm not even sure i'd say necessarily that they're wrong. i'm just saying to say implicitly it's 100% probability, that is wrong. and we don't have a plan b. >> and john taylor used to work for you. he's a lead editorial in the wall street journal. he talks about the federal reserve, qe 1, qe2, twist and

now, i'll ask you, qe3 may be more likely, dodd-frank, are all of those things hurting the long term? >> i don't want to go through the list as such but the fact is clearly clear at this stage that whatever it is, and there's lots of reasons -- >> government activism? >> there's more to it than that. but the problem basically is what we have got a system at this particular stage which is best measured, as far as i can see, by -- if you want to learn what the degree of uncertainty is and the level is what i've been using for quite a long period of time is to watch what corporate executives do, what proportion of their cash flow they choose to invest in long-term assets. that number in early part of 2010 was at the lowest ratio

since 1935. there were equivalent things in the non-corporate area, there's a significant type of contraction, very much for the same in the same reasons in residential building. in short there is a fear of the future. and when you begin to try to disaggregate what's causing that, you come up with probably 40% of it is just the fact that the economy is sagging. >> it's low prices for these assets, low prices in the market for some of these assets, too. >> well, basically what it is is essentially if you do the statistical analysis of what's causing the share of cash flow to be so -- to have such a small proportion in fixed assets, which is the reason why they're building up huge amounts of liquid assets, they don't know what to do with it, they can't use it. so the question is what's causing that. and the data say that one very

interestingly, much to my surprise, and the statistics are robust that there is some crowding out, even now, even at these low interest rates -- >> you can explain it after we tack take a break, you have to explain who is crowding out who because people don't think it's happening. we w we have a crowd in a commercial. >> you have any question, you can e-mail us@cnbc.com. >> up next, martin bail live will be joining us as we get ready for today's jobs report. again, let's take a look at the futures on our way out. the dow is down by 97 points, off its weakest levels of the morning but still down 1% for the s&p and almost that much for the nasdaq. squawk will be right back. >> coming up, more from alan greenspan.

the euro crisis, the global economy and your money. his predictions, jobs and the fed when squawk continues.

we are back with our special guest host, former federal reserve chairman alan greenspan, the president of greenspan and associates. also joint by martin becaailey,

senior fellow at the brookings institution. gentlemen, thank you very much for joining us. martin, thank you for coming in. dr. greenspan, i'd like to get back to your point of crowding out in a moment. but martin, since you're only here for a few moments. the brookings institution has been looking at what's happening with manufacturing in the united states. we have a jobs report coming out later this morning. you notice there has been a resurgen resurgence. can you tell us how you've been tracking that? >> obviously manufacturing got knocked backwards in this recession and it has been something of a bright spot. we've seen export growth be reasonably strong. there's been some recovery, about 400,000, 500,000 jobs added in manufacturing. i'm not right now as optimistic as i was a few weeks ago because the global economy is looking so weak. if we're going to continue strong export growth, we've got to have markets to sell it to. but i think we've been so sort

of leaned down that what's left of manufacturing is pretty strong and productive and we still have a lot of technology. so in the right conditions if the rest of the global economy gets going, i think we could see manufacturing as definitely a part of the economy that will help us going forward. >> dr. greenspan, does that play into your theory of there are two economies and that's part of economy that is doing well? >> well, part of it is and high tech is doing reasonably well. we have a weekly production index which actually is doing not badly at all. in fact, last week had an actual slight uptilt, as though it had been listening to martin on this issue and we is have a nfirmtory set of data, which is what we do with car loholdin, which are looked at weekly. the manufacturing sector is clearly improving relative to

the rest of the economy in the context of the fact that there's a long-term down trend. in fact, there's a huge downsizing of our gdp. i like to make the argument that the actual weight of gdp hasn't changed in decades. all of of the value added is real and conceptual. >> chairman, one of the points that you had made earlier this was idea of long-term investments, people don't want to make long-term investments. i would say for success in manufacturing industry you need to make serious capital investment. i'm curious where martin comes out in terms of the sustainability of that. >> i agree with the statement. it does come to grips with the fact that the short term is very clearly improving but it is short term. i don't think it's long term. >> i would slightly disagree with the fact a lot of people

are looking for opportunities in the energy area now with the availability of gas at much lower prices that i think will not only help manufacturing and i think people are looking into making investments in petro chemicals because the cost of energy has come down so much, we're changing the way maybe we do transportation, long haul trucks and fleet trucks are switching over to natural gas. i think there is a willingness to make some of those investments. they may not be the very long term ones but if you invest in a new set of fleet trucks, if you're fedex or some company like that, that looks like a good investment right now. >> it's basically a one-shot effect -- >> we could use a one-shot effect right now. >> i know. it's essentially the fact that shale and gas has basically become a very critical issue and fracturing as a technology has made a huge respect with respect to oil. north dakota is unbelievable.

there's a turn that's coming here and that the gas bonanza is basically a discount knewity. it's a big deal in pennsylvania of all places. i think it correct and i do agree in that regard but that is a one-shot adjustment to a very new technology. but the underlying drive towards increasing conceptualization in my judgment is essentially negative to what we call manufacturing. remember, manufacturing is a definitional issue. you include software packaging as a manufactured good. software without the package is a service, and we're on the edge of a huge amount of what we call manufacturing which could just as readily be called service. >> well, we're not -- i think there's some hope that we're going to get millions of jobs

back in manufacturing opinion i think price waterhouse cooper said we'll get a million jobs from a natural gas and one of the other consulting firms said 3 million because china is not going to do as well. i'm not as optimistic on the jobs front but i think in terms of output and our ability to export the manufacturing sector looks pretty good. >> martin very quickly, with this jobs report today, is there something you're looking on the over/under on 150, 155,000? these are short-term questions but -- >> i'm crossing my fingers because we really need a good number. i don't know that we're going to get a great number. the forecast is for 150,000. if we get that, i'll be relieved frankly because the numbers the last few weeks have not looked so good. i thought we were on track to get a decent amount of growth in the first half, and better growth, maybe around 3% in the second half. right now that's not looking so good, i think mostly because of

what's happening in europe. so i'm crossing our fingers that we get at least 150. if we get less than that or less than 100 that, could be bad news for the markets for the rest of the year. >> martin, thank you for joining us and of course dr. greenspan will be with us for the rest of the year. >> let's look at the european markets. more science of a deteriorating european market. china out with disappointing factory data showing sharply lower output in may. all of this putting pressure on equity futures ahead of the may jobs report. "squawk box" is live from washington, d.c. as we look ahead to that key data. >> we're counting down to the may jobs report. the numbers and instant reaction, just ahead. "squawk box" live from washington continues. somebody an about the volt. what really blows them away is when i tell them

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welcome back to "squawk box." we are live from washington, d.c. as we look ahead to the may employment report that is just an hour away, we have some

notable moves in the market this morning, including in crude oil. brent crude dipping below $100 a barrel for the first time since last october and west texas crude which we watch every day has fallen as low as $84 a barrel this morning, the lowest since october. all of this is in reaction to the global economic return. you see low oil prices you think great news for the consumer but the reason it's getting there is because we are very concerned about what's happening to the global economy. oil giant bp is considering a stake in its russia tnk-bp. and morgan stanley ceo james gorman tells his firm is in solid financial shape despite a down grading. listen in. >> we had the liquidity to cover the collateral. we're fully expecting some down

grade. we had the liquidity. we built our liquidity pool to take into account all potential outcomes. >> james gorman was speaking on "the closing bell" yesterday. he was also there defending his role in the facebook public offering. any speculation about nefarious activity he says is simply untrue. >> let's get to our trading block. welcome steven and ben. steve, a lot of what we're seeing in the oil markets has to do with this employment report. i don't mean the report specifically but economic worries here and around the globe. what's the supply-and-demand picture telling us? >> well, indeed, joe, over the past six months we've seen the

focus in the market shift from supply concerns related to potential military conflict to iran to now demand concerns related to global economic malaise. that's the first driver. the second driver, and i'm sure mr. greenspan can appreciate this, is the reemergence of the link of oil to the dollar. as the dollar rises or as the euro sinks, it's pulling oil prices lower. the jobs report along with last night's pmi data out of china, along with everything we've seen from the pigs and bricks is weighing on demand concern and pushing prices lower. >> i'm going to let you talk here. do you have something really important to say or should we just go to -- >> what i want to point out is just how the market's been trading and to traders out there, the most important thing to keep an eye on is the

correlations, the divergences we've been seeing. if anyone was watching the trading around 10:00 central time a.m., you saw the divergence, you saw the russell and the nasdaq holding their session lows. it's those divergeins that are key. i don't think the number for the unemployment data is so much a big deal. we've been seeing noise-type sessions after the data. i'm looking at the outer extremes, the s&p and uperp extree -- upper extremes. you need to focus on how the market trades at these outer extremes. >> thank you. we'll keep it short today. we appreciate you taking time with us today. >> we are counting down to the may employment point. it's out in just an hour. we'll have the numbers in just an hour and we'll get back to our conversation with chairman greenspan right after the break. >> still to come, walking the

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we're back this morning live from washington with our special guest host to likes a little bit of glen miller, i think. former federal reserve chairman alan greenspan is with us and let's bring in steve liesman. we talked a lot about what's going on in the u.s. but we haven't talked a lot about europe and that cloud hanging over us. you suggested the eurozone may not sitick together.

what's your latest thinking? >> it hasn't changed. i think there's only one way to keep the euro together and that's a consolidation. when the euro was originated in january 1999 there was a general expectation that cultural problems were an issue but that when they all went into the same currency, cultures would chang and t -- change and the italians and spaniards and greeks would behave like germans. they never did sense day one. >> have the markets baked into the cake that greece could leave? when you think through the permations of what happens next to spain and italy? >> the problem is that if greece leaves, the question is -- remember what happens. what do they do with the euro in

a sense -- what it is is that the drachma must come back. and then the question is what happens to their balance sheets, which are denominated in euros? that creates a fear which will invariably move toward spain and italy because that's the way markets work. people say i have 20 different places where i can invest my money. why am i here when the rates are, in my judgment, too low, even though they may be double digit. so the fear of contagion is real and one of the reasons why there's such a strong desire to keep greece where it has been, to keep greece in place is the fear of what will go on of an unwinding of the system. and i think that's a real threat. i don't know what the probability is but that is something that should be of great concern to everybody. it's not just a random notion. it's real.

>> we're watching the spanish banks right now. would you keep your money in a spanish bank? >> that's a question which i don't need to answer because i just gave it to you. >> yeah. >> steve, jump into the conversation. >> thanks, andrew. good morning, mr. chairman. do you see this, then, as a problem that is something that can be effectively addressed by the european central bank or is it really something that the fiscal authority has to address on their own? >> well, the central bank is just acting as the fiscal authority. it's got the sovereign credit of the euro where none of the individual countries do. and all of the -- all of the i should say funding of the increasing debts, fiscal problems of a number of the southern european countries is net on balance coming out of the ecb, the european central bank. there is no other source of funding.

but at the moment you can continue to expand the ecb balance sheet indefinitely as it appears and, yes, you can solve the short-term problems but these are problems which require either some form of consolidation politically or a belief that you can have an indefinite size in the central bank's balance sheet, which if that's the case, why don't we just eliminate all taxation and all the expenditures you fund by printing money. >> careful, mr. chairman, they're listening over there at the fed. i want to go back to something you talked about earlier and you talked about on this program before, this issue of uncertainty as shown in the unwillingness of corporations to invest in long-term assets. does that metric of yours exclude housing? i ask that because when i look at other metrics of business investment, for example, equipment and software spending in the national accounts and at

business investment from the durable goods numbers, we've had quite a robust recovery in both of those gauges. >> yes. i'm technically saying that there are two economies and i define them in terms of what is the maturity or life expectancy of what is being produced. if you cut off the gdp for any assets which are produced with a life expectancy of more than 20 years, you explain all of the shortfall, which means all of the software and equipment expenditures are less than 20 years. they're doing reasonably well. it is structures, buildings, long lived assets and that is true in housing and home building as well because remember that what really is going on here is that people who watching prices of homes rise up viewed homeownership as a

potential source of capital gains and long-term investment. as soon as home prices began to stabilize in 2006, all of a sudden there was a dramatic shift away from homeownership. and so that everyone is moving from long-term commitments to short-term rentals. so that even though the numbers are different and even though the concepts are different, the issue of the aversion to long-term commitments is the same in the household sector as it is in the business sector. >> chairman, i want to go to something -- yeah, steve? >> i just want to know if you can make that same uncertainty argument when it comes to housing and fiscal policy and regulatory policy on housing as can you when it comes to equipment and software? the political political implic

profound. if it's a matter of housing, that's a different significance. >> i'm not sure i agree with you on that, steve. the issue is what are the motives of the people who purchase these assets. it's very clear that the average corporate executive -- and i might say it's exactly the same in the noncorporate area. what they're doing is they're saying of the cash flow that they've got, they are investing it in very short -- relatively short-term assets. they are investing it in software, they are investing it in technology and they are investing it in capital assets with a life expectancy of less than 20 years. fairly normal. all of the shortfall is in long-lived assets and you can see it in the discounting that is going on in the far distant future.

now, i think a goodly part of this essentially relates to a general fear of what the longer term outlook is and i don't want to get into the full detail of this but just to take a single issue, the issue of too big to fail. one of the responses that i thought was remarkable with respect to, for example, the jpmorgan problem with $2 billion or $4 billion loss was it's a big loss but they do have $200 billion in net worth and the question is, well, why should government be concerned about that? in a capitalist society, people lose money all the time. what the implication of that, of the political discussion was all about, was that in fact if jpmorgan's in trouble, it will be bailed out. >> and you were a former board member of jpmorgan, not for a long time -- >> ten years.

>> long ago. >> that's when it used to be triple a. >> i want to turn the conversation real briefly because we had an interesting conversation during the break about china and in this grand debate about stimulus and austerity and what to do -- >> and infrastructure. >> and infrastructure spending, you had a very interesting comment. would you share that again? >> the problem basically with china is remember they can produce whatever gdp they want basically by authorizing, for example, provinces to build buildings and then indicate to the state-owned banks that they be financed. can you create whatever you want. now, the problem basically is what we see when look at the detailed data of china is the effectiveness of their capital structure is really very low. that if you measure say the capital assets of china relative to their actual output versus

ours, it is dramatic. we have an extraordinarily efficient financial system, even with all of the problems we're talking about, which directs the scarce savings of the society into the most effective cutting edge technologies. china has no mechanism to do that and what is happening is an increasingly larger proportion of their capital stock is waste. >> they have a thousand solyndras. >> we're going to leave it there for now. we're going to come back from this conversation and get some final thoughts from you in just a little bit. >> and, steve, thank you. >> up next, some final thoughts. when we return, i have an idea for fixing everything and i'm going to see if it will work, ask the chairman. still to come, our expert panel on jobs, plus our reaction from leaders on both sides of the aisle. steny hoyer and eric kantor and

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the escalator is not working at some train station or something. why not raise taxes on people who don't spend money, they just keep it anyway and make beautiful improvements across the country that would employ people and we'd end up with a better country? what is flawed about that thinking >> where do i start? >> i don't know -- >> let me say this. >> you made your point about china. the government doesn't know how to -- >> the problem basically is that you can put an array of type of goods that the american people in general would want. it's three times the size of the gdp. the question is you need a rationing mechanism in the marketplace in order to determine what is it that creates the highest standards of living, what in effect directs the savings of the society to the most productive asset. >> ten smartest people, we can

pick them, to decide what we can do, alternative energy, all this great stuff, right? >> great stuff. i used to be one of them. i couldn't do it. >> you're right. >> and let me say this -- we've seen innumerable instances in history of precisely this process. the fabian socialist movement was going to do that. and india to make the point, put in place a number of technocrats in government who were going to be very smart, knew exactly where to put everything, and it failed miserably. and the reason it is is that we don't have the capacity individually to know what the markets or what consumers would want and you can do what you're suggests, joe. the trouble unfortunately is you'll end up with a very inefficient capital stock and

the standard of living ultimately will decline. and -- >> boy, it sounds good, though, and we'll hear a lot about it during november. >> i have no doubt there are bridges are collapsing -- >> the cool bullet trains. everybody else has them. >> the savings being used to advance investment -- investment and savings are always equal at the end of the day. we don't have that much savings in society. we make it up by a very efficient use of what we've got. to the extent we use it for something that is nonproductive, it is essentially not going to the productive areas of society. >> it goes back to letting millions of individuals decide on which way things should work instead of ten really smart people, right? the invisible hand. we're talking about stuff from 300 years ago or whatever, 200.

>> it would be terrific if that worked. it doesn't. >> you told us in the past you watch the ten-year yield very closely, we've made sure we put it on the screen more often as a result. when you wake up in the morning, what are the first market points you're watching to get a gauge of what's happening? >> i look at the sovereign ten-year yield of italy and then seconds later spain. and then actually i also look at the spread between the french ten-year sovereign note and the bund. and the reason for that is that's giving me a notion of what the underlying structure of europe is doing. >> dag gone it, last time you told us it was the ten-year note here and that's all we know. >> italy is at 5.97, spain is at 6.57. >> i think that -- and i've been saying this for a very long

period of time, from day one the euro has not really worked. and the problem is that it's creating a huge degree of lack of competitiveness for southern europe because their culture is different. and i'm going on to argue in a book i'm writing that we way underestimate two things in this world. one is the impact of culture, including the united states, and equity markets, meaning the extent to which the market values of equity on the balance sheets of countries is a far more potent force than i think we estimate. those two things i think when you bring them all together explain why innovation happens in certain ways and why it is that the united states is where we are relative to the rest of the world. >> wonderful. wonderful. it's always the same. i wish you'd say grasshopper

once in a while when you were talking to me, say "thank you, grasshopper," because i feel like we learn so much. >> we learn a lot. >> coming up, the final countdown is on. just a little over 30 minutes away from the jobs report. we're going to get predictions from our expert panel after the break. >> if you're just tuning in, you're two hours too late. >> you really have two separate economies. one economy is behaving reasonably well and the second part of the economy, they are operating at half of operations. in other words, they're down almost 50% and the reason is there is an extreme level of forward discounting going on. >> so the manufacturing sector of our economy is clearly improving relative to the rest of the economy. >> the third hour of "squawk box" starts right after the

break.

the wait is almost over. >> the unemployment rate -- >> it's a number that could impact the presidential election and move the markets. the may jobs report is just a

half an hour away. and we're bringing it to you live from washington, d.c. final predictions from mark sandy, diane swan, austen goolsbee and house minority whip steny hoyer and we'll get analyst from neel kashkari and eric cantor. the third hour of "squawk box" begins right now. welcome back to a very special edition of "squawk box." it's getting specialer and specialer -- is that a word? i'm joe kernen along with becky quick and andrew ross sorkin. we have a lot of people coming up we're going to talk to. our usual list of characters, the two guys that look alike, goolsbee and sandy. we're in washington, d.c. when

you get a shot of becky, you'll see that's not fake -- >> no, it's real. >> of becky or the capital. we'll bring you the closely watched may employment report. poll forecasters say the economy likely added 155,000 jobs last month. that has come down, the estimates have, with the adp number and other data points we've seen. it is up at least from 150,000 which was a paltry number we saw in april. the unemployment rate, which is i think actually prohibited from going up here between now and november seen holding steady -- >> blah, blah, blah. >> -- at 8.1%. our panel of experts is ready to give their final predictions but first our morning headlines. >> the futures have come under quite a bit of pressure this morning. this after new numbers from china showing weakness in demand for chinese products. that's started things and then we have all these concerns still about europe. right now you can see our

futures are down by 108 points, the s&p off by over 15 points. these are moves over a percent lower for the s&p and nasdaq and the dow down by almost 0 .9%. the real concern is what's been happening with the european markets. right now greece is down by 3.8%. believe it or not spain has ticked barely higher. of course this comes after many, many days of being down. in germany the dax is down by 2.77%. the ten-year here in the united states is a reflection of that fear. the ten-year yield continues to drop, 1.521%. it's unbelievable. it's one of the things alan greenspan watches but he said it's also the italian and spanish ten-year he watches first thing in the morning. and crude oil, the pressure it's been putting on the euro, the

gains the dollar has seen. believe it or not, we could could break $84 today. crude at its lowest levels since october. and morgan stanley james gorman says it's expecting a down grade from moody's but it won't have to raise capital. >> we have the liquidity to cover the collateral. we're expecting there will be some downgrade. we had the liquidity. we built our liquidity pool to take into account all potential outcomes. it won't have an impact on our capital at all. >> that was gorman speaking yesterday on "the closing bell." he said morgan stanley sold assets and increased liquidity after the financial crisis and is much better shape than the marketplace understood. >> walmart kicking off its shareholder meeting today. courtney reagan is at the event.

>> walmart associates from around the world have been parading into the bud walton arena. justin timberlake will be the emcee, as well as talk that celine dion could be here, too. so far the mood of shareholders seems jubilant. >> with the right policies and practices from this point out, we can help fix that. i think that walmart overall, you know, can come back from this and be stronger than ever. >> you feel everybody's love for the fact that we're walmart. >> i must go back and report that all is well. walmart! >> shareholders, as it's referred to here, is largely a pep rally for the company. there is business to be done. among the proposals, election of the board of directors. all 15 are expected to be

reelection, despite the fact that numerous pension funds have voted their shares as unfavorable. >> the may jobs report is less than 30 minutes away. let's turn to our panel of experts, chief economist mark zandi, also with us is austen goolsbee, he teaches university evident of chicago booth school of business. mark, why don't we start things off with you? >> sure. i expect a gain of 165,000 on payroll. i heard you say 155 k on the consensus. that sounds high to me. my sense is if we got 15 the markets would be pretty okay with that. >> that is probably right. 15 right now is dow jones, i think 150 is reuters or vice ver versa. certainly those numbers have been coming down. >> it feels a lot softer than

that. we should also look out for revision. we've been getting consistently upwards revision to the data, an average of about 30, 35 k. i expect to see that again. and the unemployment rate i think will tick down to 8%. the winding down of the emergency uninsurance program is going to weigh in. i think in all likelihood the unemployment rate will be well south of 8% by election day. >> diane, how about your prediction predictions? >> i'm a little lower. i hope mark's right. i've got 8% on the unemployment rate, 130 on the employment. people unwinding uninsurance is a big factor and the 1947 baby boomers are retiring. no conspiracy, joe, sorry about that, but the up employment rate will be way down and those people unwinding off the 99 weeks. >> austen, your predictions? >> well, i'm sort of

pessimistic. i think the fundamental math is always the same, that we're in a race against productivity and the growth rate hasn't been very high. i don't think it's going to be more than 120,000. the unemployment rate either stays the same or might tick down a tenth but all of that coming from labor force -- >> depends on how they feel, what they feel like putting up there. >> here come the helicopters once again. >> let's go with 8.1. or 8. >> austen, you bring up the right point, though, here come the helicopters. are we looking at qe3 if the number falls below 120? >> i think probably but we can have a whole separate discussion of do any of the qes wind the

needle on the wider economy. i think they don't. mark's number on the revisions, whatever number you're getting here, 20 of the last 24 months got revised up bip 30,000 on average. so whatever the number comes out, it's probably going to be understated 20,000, 30,000 from what the actual is. i think they got the seasonal adjustment a little messed up over there. >> i've seen that point made a lot but i'll throw this to any of of the three of you. 25,000 or 30,000 more jobs isn't going to make us feel much better, is it? >> no, but it's better than the baseline. when you're only growing a little bit, that makes a big difference. that is important. >> we had that month where it was zero. last fall, the first bad month was zero. that's now been revised up to plus 85,000. i mean, there's just something weird going on. if you look at the nonseasonally

adjusted numbers, you don't see any revisions like that. something's weird in the formula. >> and that's also relative to expectations. if last month was 115, that ultimately gets revised up to 150, that was pretty much what the expectation was for that particular month. >> that's a fair point. >> the other important point austen brought up is the prospects of additional quantitative easing. that is going back to alan greenspan talking about the issue in europe not going away. this has been over a two-year crisis that keeps flairing up worse and worse. this is something that's not going to go away. unfortunately we're not an island and i think that will be one of the big determinants as whether we do see qe is not 100,000 or 120,000 employment, it's going to be what's going on in europe and how they can influence the markets. >> can i take it back to the

uninsurance rate and uninsurance programs? >> yeah. >> it is true as the ui program winds down, we're going to see some older workers step out of the workforce, they won't be counted as unemployed and they'll be out of the workforce. i also think there's a large group of younger workers who have been taking their time looking for work because they can and they probably should and now as they run out of ui they're going to teak jobs and there are job openings. the number of job openings has increased substantially. the expiration of the uninsurance employment program could also help to support better job growth. >> austen, you were in the government and remember how you used to talk when you were part of government -- >> i'm putting that out of my mind. >> he's back into the sanity of chicago. >> exactly. but what you don't appreciate about my conspiracy theory is -- just hear me out here -- if the number stays at 8.1 or done i

say huh? and if it up ticks, i say see what happens when you shine a light? either way i'm going to be right about this. >> it will go down and then it will go back up. that's one this evening you can't count on joe. >> it's like the china gdp numbers. they could never make certain assumptions and make them look a certain way, t, andrew? >> you have a big light -- >> in my own mind is doesn't matter. >> without swank in between you eyes, i would be rubbing my eyes. we need you there, diane, you say great stuff. >> mark is getting insulted every month with that, joe. you got to chill out on it. >> no, i'm tethered at the hip with you, austen. >> this is macho. i can't decide which one of you

guys is better looking. it's that close. >> diane, i play the same role between joe and andrew. >> and, becky, i missed you last time. i told you i saw you. and it's good to have a feminine voice. >> and it's great to have you here. our panel will stick around to help us break down the numbers. >> you are looking at a live shot at the official labor clock. we're counting down to the 8:30 a.m. may employment report. house minority whip steny hoyer will join us with his take on the economy, jobs and eric cantor will be here as well.

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headlines that are coming our way this morning. chrysler out with may sales figures, up 30% over a year ago. that's below estimates but still its best may performance in five years. and the big talker of the morning, former president bill clinton has a message for his fellow democrats. he says demonizing private equity politically is wrong if restructuring underperforming businesses was necessary to save them and make them more productive. take a listen to this. >> when you try, like anything else you try, you don't always succeed. i don't think at that we ought to get into the position where we say this is bad badwork. this is good work. >> the president there pulling a little bit of a cory booker in some respects. it was pretty interesting, saying that governor romney has a sterling business record. >> except the president already saw cory booker do it and saw what happened there so he had plenty of time to think about it so it's nothing like cory

booker. >> we see if the president makes a youtube video -- >> we'll continue this conversation. joining us in the conversation -- >> steny hoyer, i want to talk about jobs and a lot of things but react, if you would, to what bill clinton said about private equity and governor romney. >> i think president clinton is correct. private equity is a very important aspect of growing our economy. obviously there's good practices in private equity, there are bad practices. you criticize bad practices but not the whole enterprise itself. >> is it unfair for the president to attack romney on his business record? >> i think romney has made his business record a central theme in his campaign. how in heavens name can you avoid discussing his business record? he's said i'm a guy who can build businesses. he clearly must have expected

his business performance was going to be at issue. of course it's going to be at issue. >> we have eric cantor coming on in a little bit. >> wonderful. >> you have gone on attack in recent days over his plans for the summer and what the gop is and its strategy is and you've been critical about it. >> i think it's spin, i don't think it addresses the issues that are critical to the economy. >> you said he's not putting anything on the table. >> i don't think he is. >> i could turn it around and say have the democrats put anything real on the table? >> you just saw part of our substantive agenda where the automobile companies are pumping very well. gm has sold more cars around the world than any other manufacturer. they were on the ropes. in terms of a substantive agenda, we've had a very

substantive agenda. that agenda has grown over 4 million jobs. i don't know whether mark zandi is right, or others are right, but the fact of the matter is 4 million new jobs over the last two years. >> in fairness, can anybody get anything done before the election? >> in my opinion it going to be a real challenge between now and the election. that's why i've criticized the agenda, which i think is thin groulx at best. we need to have substantive agreement. i think the speaker and the president tried to get there, in my opinion the single biggest stimulus package we could have is coming together and putting this country on a long-term, physically sustainable credible path. i think that would free up trillions of dollars that businesses have and i think they'd feel confident in the economy. every business person i talk to around this country agrees that's the key. >> you just pointed out the president under his

administration, the country has created 4 million jobs. >> yes. >> but we still far short of where we should be. >> we were in a 10 million job hole. >> at least 8%. there are many critics who say that those jobs should have been created faster, we should have more of them precisely because of that hole, that we should have bounced back more quickly. if it's fair to criticize romney for putting himself out there for being a business leader, then it's fair to criticize the president for saying where are the rest of the jobs that we're looking for. why haven't we grown faster? what's the problem? >> when you say why is the cup half empty as opposed to whether it's half full, the point is under george bush's economic program that was adopted, eight years later what happened? we lost 4 million jobs in the last year of his administration. >> but we're at 8% unemployment. >> the administration inherited the deepest recession anybody at this table and most of our viewers have experienced. >> no argument with that. >> and it was a financial

meltdown, which are the longest recoveries after those kinds of meltdowns. what this president has done, he came in with an economic program that in fact kept us from going deeper into the recession. the first six months were very tough, 780,000 jobs lost the last month of the bush presidency. this month we're going to turn that around by a million. rather than 780, there will be 150, 125. we've had 11 quarters straight of economic growth. >> with unemployment above 8%, it hard to say a lot of people feel great about where things are. >> they don't. not only would it be hard to say, it would be untrue. a lot of americans can't find job. we were in the 10 million job hole. we dug out 4 million, we have a long way to go. but one of the problems is we've had this gridlock in the

congress where the principal objective has been to undermine the ability of president obama to move this country forward. >> where do you put your chances in the house now? >> i think they're very good. no worse than 50/50. >> in trade has you losing the senate and the house. diane scott walker winning handily in wisconsin, too. so there's certain things going your way, certain things aren't. you think you're going to take the house back? >> i think we are. >> will speak are pelosi be speaker again? we just called you leader. are we living in the past or living in the future? >> i was the leader and hopefully will be the leader. >> what should we call cantor when he comes in? >> we need to work together. very frankly, in terms of grows the economy, the president said we need to do xm bank. mr. cantor couldn't get it done

with his party. it took time but it part of our make it in america agenda. very important for exports and jobs. >> thank up for joining us. >> leader who ier. >> we usually see him over remote. >> i was scared. you're too close. i was afraid to say anything too -- >> i was told to belly up. that's what i was told and i follow instructions. >> when we come back, we're going to count down to the release of the may employment report. we'll bring you the numbers and instant reaction from our panel of experts. stick around, squawk will be right back.

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welcome back to "squawk box." we're about 30 seconds away from the employment report, and we're joined by a lot of special welcome back to "squawk box." we're about 30 seconds away from the employment report, and we're joined by a lot of special guests. but ahead of the numbers, the dow futures have been down through most of the session and they are keying off more weakness that we're seeing in

europe and it doesn't -- we don't just look at the averages in europe. every day now we're going to be watching the italian yields, spanish yields and french yields. that's what the chairman is watching. hampton joins us live with the numbers. >> up 69,000, may nonfarm pay rolls increased by just 69,000 job, average hourly earnings 0.1%. the last time we have job growth below 100,000, april of this year when it was 77,000 or back to august of 2011 at 85,000. the consensus as we mentioned downward adjustments in march, april down 38,000 below what had previously been reported. private sector job growth in the month of may up just 82,000

jobs. overall job growth, health care up 33,000, transportation and warehousing plus 36,000, manufacturing adding 12,000 and wholesale trade adding 16,000. but the job losses, construction huge, down 28,000, government employment down 13,000, leisure and hospitality sectors losing 9,000 workers. also the long-term unemployment increased from 5.1 million to 5.4 million, 42.8% versus 41.3% the previous month. the labor force participation rate actually increased by 0.2% because the civilian labor force overall increased by 642,000. that's the biggest one-month drop in terms of the size of the labor force since 2007. overall here, nowhere to hide given this report. back to you guy. >> thanks, hampton.

let's get some reaction now from all of our panelists. rick santelli has joined us, steve liesman is with us as well. we have economists with us in addition to diane swank we have the good economists on the bad and the bad economists -- you guys look alike. zandy, you were way too optimistic again, right? >> yeah. yeah. i'm very disappointed, yeah. there's nowhere to hide on this one. i was wrong all the way around. the only thing i can hang my hat on is the big declines in construction which doesn't seem consistent with much and anything. maybe there's some weather pay back. it looks like the economy has throttled back, i was just wrong. >> austen, i waited till you left government to start being right about everything. this is incredible. >> i was right all along. whatever i said i stand by it. >> this is not a good time to be

right. >> exactly, this is not a good time to be right but what we got is the economy has slowed down. you saw that in the numbers. and if the economy's growing slower than productivity, nobody has to hire anybody to grow that fast. they can get that from their existing workers. so the stuff in europe is not making this problem any easier. >> for anybody who is listening at home, we should point out again the market's reaction. the ten-year is down to 1.46%, the dow is down 200 points right now. this is some severe market reaction. >> the reify is going to get better. >> the other interesting thing is the increase in labor force participation and increase in labor force after reversing that last month, again, you get into some of these numbers and you're looking at it going are there more people throwing their hat in the ring because they're hopeful? yet year not generating the jobs.

that's not a great thing at this point in the game. joe, maybe you won't be proved wrong at all. >> you weren't listening before when i said i was going to get it right either way. >> but this is a big move in a month, right? >> but, diane, to me one of the b big issues in terms where the market is going to go, do you say qe3 is in play? or as joe was saying, you guys didn't see it on screen, what does this do to the election? does that mean romney is in a better place? what does it do to what people are thinking about the markets? >> there's no question the economy is still struggling. i'm starting to fear summer. i remember a time when i was a kid and i liked summer. i gotten to the last five years summer is the time everybody falls apart. we start optimistic about the economy and it falls apart.

>> those are the kind of jobs we're creating. >> this is not good. and we need to see a big reaction sell racial. i'm not sure we will see a big reaction sell racial through the end of the year. i don't think it qe3 yet. i think the fed has to keep what little powder it has dry. but europe is a big issue here. you add europe to this uncertainty and it's why people are pulling back on hiring. >> we're going to hear a lot about europe, especially from the white house. rick, we haven't seen you yet today. that ten year is pretty incredible now. >> well, you know, some very significant thresholds. we obviously traded under 150. we're trading 146, we were at 144, 145. we briefly traded under 123 in the euro versus dollar. i saw 122.95. that's pretty interesting. we traded under 60 basis points briefly in a five-year note, which is back at 60 basis poi s

points. you know, i think we should discuss quantitative easing. the correlation is going to show us we need lower rates. that five year and 60 basis points, that's really the problem. weep need to get that down to 25 or 30. we we see the zero coupon, it zero. that's helping europe. that's what we need more central banker brain storming. >> gold turned around $25, rick. >> gold is going to suffer from its own benefits because, you know, if you have a stockpile of good things, you need to take that stockpile and divvy it up when everything starts to slip under baseline. and of course the stronger dollar which gives that quantitative easing their additional second argument, the dollar has done better because europe is obviously doing worse.

so now that it's standing up, they can look to knock it done again. it gives them that extra slack with the solid dollar performance to try more of the programs that hurt that. and energy prices. >> steve, you can -- i don't know whether you still want to talk about greenspan and housing or whether you've moved on. do you want to talk about this number now? >> sure, sure. pretty weak throughout, joe. when you look and try to look at some of the stuff where you might get some offset, there is no offset there. if you have lack luster job growth, can you make pick it up in weekly hours. you're not picking it up there. that fell 34.4. we started to pick this up a couple weeks ago, the idea that we were at some sort of roadblock between gasoline prices and whatever, the payback from the winter months, that seemed to play itself out. the revisions we said for a very long time when the revisions start to go the other way, that tends to point to the direction of where things are going.

so getting down to 87,000 -- john sylvia at wells fargo points to the 28,000 in construction decline. maybe that's overstating it. we've reaction sell rated or gotten to old levels again when it comes to government firing. the u-6 ticking back up to 14.8 and 27 weeks or more ticking up to 5.4 million. the only good thing you might say is the household number came back to 422,000 after several months of decline. but, again, the volatility of that -- economists don't even like to follow that very much. reflecting the weakness in the economy we've seen. >> no one would say recession in 2013 yet, right? we're not in position of that i'm sure. but that is -- >> if we mess up on our fiscal policy we certainly are. >> we got to go again. it's a three-hour show but rick, steve,mark, diane, austen,

thank you. >> again, those numbers that just came in, up 69,000 for the jobs report, well below the 150 to 155 that had been expected. unemployment ticking up to 8.2%, creating all kind of havoc. the ten-year, 1.459%, dow is down almost 200 points. when we come back, we'll get political reaction from the may jobs number from house majority leader eric cantor. need any help?

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and welcome back to "squawk box" live from washington, d.c. for more reaction to the jobs number, house majority leader eric cantor is here. the market was weak already because of europe. then we said this could really accelerate if we got a bad jobs number. it wasn't just bad in the past month, they even revised the two previous months which had been revised upwards, those were bad, too. this isn't good for anyone obviously. >> this is terrible. these job numbers are pathetic. and i think it just really cries out for us to actually try something new now. we've seen again and again the repeated policies of government regulation, of more prescription coming from washington, all adding uncertainty. i know, listen, joe, i was in my district last week down in richmond and talking to business owners. there's too much uncertainty. they don't know what their tax rates are going to be, they

don't know what their health care costs are going to be. lord know what is kind of regulations one of these agencies in washington are going to come down with. >> last summer it was the republican's fault because of the debt ceiling debate, or at least that's the rhetoric you're going to hear. this year it's not going to be you per se, it's going to be europe, that things were going along well, managing the economy pretty well but now dag gone it, i got hit by this external factor out of europe. that's what you're going to hear, right? >> it is. >> it's never about -- >> it's time for to us own up here. the policies that have been coming out of this administration here in washington have not worked. it's too difficult for the job engine of the private sector to get going here. we have got to change course. >> i think we may intro down here. it was at 60 and stuck at 60 on

the president's reelection. stuck there. and as can you see how long it was at 60. and then the minute the economy started showing some signs of weakening again, it started slowing coming down. it was at 57.5 yesterday and just from this morning it dropped down 2.5 points to 55. some people like intrade, some don't. when it was high i had republicans saying it doesn't mean anything but -- >> do you think this could have an impact on the market? if you believe -- >> if it goes low number, romney looks more like -- >> do you believe the markets actually then turn? that's an interesting question. >> andrew, i think so -- >> you're asking him. >> you look at the consequences of this election. if people are looking for some certainty, i think most business people and working families would say they don't want taxes going up. what we're going to do in the house next month is bring a bill forward to say if republicans win this election, your taxes are not going to go up and we're going to pursue tax reform the

way we know can help capital flow to more efficient use. if you feel your health care costs are too uncertain and you're scared to death -- >> do you when this is going to happen? do you know which monday in june -- this coming monday is a monday in june. it could be any monday. >> crude oil just fell below $83. there's a lot of concern about what's happening around the globe, real concern about the economy. we saw these weak numbers. there's two things that can address a falling economy. the first is the fed if it gets involved and does monetary policy or fiscal policy. if we look like we're going to fall off a cliff at some point, would you move for more sort of stimulus that comes out of congress? >> becky, i think we've been down that route. we've seen the largest stimulus bill ever when this president first came into office and what

did that end us up with is extraordinary amounts of more debt. i believe that the stimulus you need is a signal to the private sector that it's actually a good time to take a risk and invest now. and you can't do that when you're clouded with this prospect of where do my taxes go. that's a direct bearing on an investor as return. it used to be when you made $1 in your business, you knew you'd be able to keep 64 cents, 65 cents of that dollar. it's just not the case right now. and meanwhile you have the president sit hearing saying and the democrats in congress saying we want tax toes to go up on people. people who make $1 million or more, they should pay. this is all adding to uncertainty, raising the price of risk. stop it. we got to get the real stimulus going, which is the private sector and entrepreneurs of this country. >> we have july 1st, one cliff

on student debt. what's going to happen? >> i think you'll see speaker boehner and i together with the leaders and republican side on the senate are going to communicate to the president that we want to work with them on this issue. we don't think that it's a good idea to put more debt on the students coming out of college. we want to do so in a fiscally responsible way. we're proposing more pay fors toe sew wee don't dig the hole deeper in the picture on the federal deficit, yet we've not seen any willingness on the part of the white house of let's fix this rather than leave it out there as a political issue. >> i'm watching every tick in the future because i'm expecting what you'reecting and that is -- >> there's going to be some kind of moment in the day. >> qe3. >> people realize this is going to be a fed thing and maybe -- there's always -- we don't try to find silver lining but this could mean qe3 and that would be taken differently by traders than just a slowing economy. if it doesn't happen --

>> thank you for being here. >> coming up, we have the may jobs numbers. up next, we'll get reaction from pimco's head of global equities, neel kashkari will be here. thanks. and how much the people in your life count on you. that's why we offer accident forgiveness... man: great job. where your price won't increase due to your first accident. we also offer a hassle-free lifetime repair guarantee,

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♪ >> coming up, another "squawk" news maker. thank god we had neel on last time. i said oh, you're crazy. neel kashkart. >> monday, on "squawk box," harry wilson. he'll sound off in his first interview since joining the board of yahoo. don't miss "squawk box" monday starting at 6:00 a.m.'s terp. if you're one of those folks who gets heartburn and then treats day after day... well, shoot, that's like checking on your burgers after they're burnt!

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our jobs reaction is going global this morning with" squawk master. neel is former advisory to the treasury secretary. henry paulson, you know, what do we do now? we've got these numbers that are weaker than expected. numbers are blowing out in all kinds of directions. what worries you the most? >> obviously, the risks of europe are dominating the sentiment right now.

i think the jobs number substantially increases the qe3. unemployment is not coming down, in fact, it's going up in terms of the economic rate. and, now, with the bond markets, you're telling us there's risk of a deflationariy shock in europe. those rigs sks are coming back again. >> is that good news or bad news? >> well, you know, qe by itself is a good temporary elixir. we've talked about it before. it's like morphine. i think it makes you feel better. i think qe3 would be better in the near term, but it does not move as close to solving europe's fiscal situation. it buys us time, but ultimately,

policymakers need to take advantage of that time to make actual structural reforms to reform the economies. >> are you just too classy to remember the last time you were on, there's all of these risks, risks, risks. that was a good time to be talkitalk talking about risks, neel. >> i'm not surprised, but i'm also not happy about it. no one is benefitting. so nobody wants to celebrate what's happening in europe or the anemic job creation in the u.s. >> and neel, what do you tell investors? you're in the equity business. right now, given those numbers, should they be buying your funds right now? how do you even think about this right now. >> it really depends on the time horizon of the ip ves tor. if you look at the people who invest in equities in 2008. people who stayed invested in the u.s. have made back about 90% of their money.

if you have a long enough time, if you can stomach the volatility, we think equities can still be attractive. there's still good stocks to be bought. >> do you think things are going lower before they go higher at this point? >> well, look, it really depends on policymakers. this is why it's so hard to predict short term movements. the fed is actively trying to target a price level. so stocks could certainly move lower. but if there is qe3, we expect stocks to rally on the back of that. trying to predict from the fed is very difficult. we're much more difficult than long-term fundamentals. in light of these risks, we are absolutely going up the quality curve. global leaders selling in to stronger markets. >> what about just the treasury. we've been watching the ten-year this morning falling well below 5%.

>> it is shocking. it's shocking to me, too. it appears that there's a disconnect between the equity markets and the bond markets. the bond markets are worried about this deflationary shock and to some degree, looking through it and believing that the policymakers will do what's necessary to preserve stability in the euro zone. we've seen it for the last couple years. we're going to see it for the next couple years. >> neel, when we get to the point where the risk is just an exit by grace and maybe even more, an even slower growth scenario in europe. when we get to the point where the market discounts that and the only thing that would throw us for a loop is a real financial calamity. are we getting close to the bottom just based on reasonable risks in europe? >> i think it's possible that our best case scenario is that

greece will exit the eurozone. the question everybody has, and we don't know it for sure, is whether or not that can be done in an orderly or disorderly manner. if they can engineer orderly, than maybe equity markets are going to bottom. >> but there still is the tail risk of fragmentation in the euro zone. >> sooner or later, the market is coming down, down, down. it's going to be greece exiting. but if it unravels and then there's somebody else. >> there seems to be -- we've got to run in a second -- a change in position on this, though. and now people are starting to get anxious all over again that maybe greece has to have it. but it may not have an orderly. >> a year and a